Question: Given that the expected return on the market portfolio is 10%, the riskfree rate of return is 6%, the beta of stock A is .85,

Given that the on the market is 10%, the riskfree rate of return is 6%, the beta of stock A is .85, and the beta of stock B is 1.20:
a. Draw the SML.
b. What is the equation for the SML?
c. What are the equilibrium expected returns for A and B?
d. Plot the two risky securities on the SML.

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